Invasion spills over globally—semiconductors

Charlie Vest et al., "The Global Economic Disruptions from a Taiwan Conflict," Rhodium Group, 12-14-2022, https://rhg.com/research/taiwan-economic-disruptions/-- 嘉玮

A truly global impact

Because the channels of disruption from a Taiwan conflict are so far-reaching across trade, investment, and financial channels, even countries that, on the surface, appear only remotely linked to Taiwan would also face risks. A rapid slowdown in Chinese demand for imports would impact commodity export-oriented developing economies that may only have tangential links to Taiwan. Disruptions to ICT and auto value chains would hurt countless economies up and downstream from semiconductors. The world would likely suffer shortages of critical goods ranging from agriculture and mining equipment to medical and telecommunication devices.

Effects on Taiwan-exposed value chains

A conflict between China and Taiwan would be highly detrimental to countries exposed to semiconductor-related value chains. These include major global producers of auto components and vehicles such as China, the US, Japan, or Germany, but also economies for which auto production represents an important share of GDP, as is the case with Slovakia, Czechia, and Hungary (see Figure 3 below). During the 2021 semiconductor shortage, average European passenger vehicle production fell around 13%, with German production tumbling nearly 20% and Italian production over 25%. While this shortage was severe, the impacts of a full-blown blockade of Taiwan would be far greater.[9]

A conflict would also hurt Taiwan’s regional trading partners, who rely heavily on Taiwanese chip inputs for downstream semiconductor assembly and testing operations, as well as electronics assembly. Among them, the Philippines, Vietnam, Malaysia, and Singapore could experience major disruption (Figure 4).